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Bonus Chapter A

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Working Within the Legal Environment

McGraw-Hill/Irwin

Copyright 2010 by the McGraw-Hill Companies, Inc. All rights reserved.

DAVID BOIES
Boies, Schiller, and Flexner

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Profile

Often called the best trial lawyer in the U.S., Boies represented IBM, CBS, Calvin Klein, the New York Yankees and Wachovia.
Didnt learn to read until 3rd grade because of a learning disability. He now heads his own firm of over 200 lawyers.
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The NEED for LAWS

The Case for Laws

LG1

Laws are a key part of a civilized society, but must change with the times.
Judiciary -- The branch of government chosen to
oversee the legal system through a system of courts.

The U.S. courts system is organized at the federal, state, and local levels.

APPA-3

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TYPES of COURT

The Case for Laws

LG1

Trial courts hear cases of criminal and civil law.

Appellate courts hear appeals from the losing party at the trial court level.

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TYPES of LAW
Criminal law defines crimes, establishes

The Case for Laws

LG1

punishments, and regulates the investigation and prosecution of people accused of committing crimes.

Civil law proceedings cover non-criminal acts marriage, personal injury lawsuits and more.

Business Law -- Refers to the rules, statutes,

codes and regulations that provide a legal framework for the conduct of business.
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MAJOR AREAS of LAW

Statutory and Common Law

LG1

Statutory Law -- Includes state and federal

constitutions, legislative enactments, treaties of the federal government and ordinances; written law.

Common Law -- The body of law that comes from

decisions handed down by courts; unwritten law.

Precedent -- Decisions judges have made in

previous cases to guide their handling of new cases.

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ADMINISTRATIVE AGENCIES

Administrative Agencies

LG1

Administrative Agencies -- Federal or state

institutions and other government organizations with delegated power to create rules and regulations within their given area of authority.

Examples of Administrative Agencies:

- The Federal Reserve Board

- The Securities and Exchange Commission

- The Equal Employment Opportunity Commission - The Federal Trade Commission
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PROGRESS ASSESSMENT

Progress Assessment

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Whats business law? Whats the difference between statutory and common law? Whats an administrative agency?

APPA-8

WHATS TORT LAW?

Tort Law

LG2

Tort -- A wrongful act that

causes injury to another persons body, property or reputation.

An intentional tort is a willful act that results in injury.

Negligence -- An unintentional
tort that causes harm or injury that was not intended.
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PRODUCT LIABILITY LAWS
Product Liability LG2

Product Liability -- Holds businesses liable for

harm that results from the production, design, or inadequate warnings of products they market.

Strict Product Liability -- Liability without regard

to fault; a company can be held liable for a defective product even if they didnt know of the defect.

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MAJOR PRODUCT LIABILITY CASES
Company
Ford Motor Company A.H. Robins Jack In the Box General Motors Major Tobacco Firms
Product Liability LG2

Year
1978 1987 1993 1999 2004

Settlement $125 million in punitive damages awarded after a boy was severely burned during a rear end collision
Dalkon Shield recalled after eight separate punitive damage settlements Assessed large damages after a child died of E. coli and others became ill Paid $4.8 billion in damages in faulty fuel-tank case

$130 billion sought by the federal government for smoking cessation programs (settled for $10 billion)
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PATENTS, COPYRIGHTS, and TRADEMARKS

rights to their inventions for 20 years.

Legally Protecting Ideas: Patents, Copyrights and Trademarks

LG3

Patent -- A document that gives inventors exclusive Copyright -- Protects a

creators rights to materials such as books, articles, photos, paintings, and cartoons.

A trademark is a legally protected name, symbol, or design that identifies the goods or services of a seller.
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PATENT FACTS
Patent applicants should seek the advice of a lawyer. Foreign companies are eligible to file for U.S. patents. Patent owners have the right to sell or license the use of their patent to others.

Legally Protecting Ideas: Patents, Copyrights and Trademarks

LG3

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U.S. PATENT LEADERS in 2008
Company
IBM Samsung

Legally Protecting Ideas: Patents, Copyrights and Trademarks

LG3

# of Patents
4,186 3,515

Canon
Microsoft Intel

2,114
2,030 1,776

Source: IFI Patent Intelligence.

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WHATS the UNIFORM COMMERCIAL CODE?

Uniform Commercial Code (UCC) -- A

Sales Law: The Uniform Commercial Code

LG4

comprehensive commercial law that covers sales laws and other commercial laws.

The UCC has 11 articles that contain laws covering a wide range of business issues.

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Warranties

UNDERSTANDING WARRANTIES
LG4

A warranty guarantees that the product sold will be acceptable for the purpose for which the buyer intends to use it. Express Warranties -- Specific representations
made by the seller that buyers rely on regarding the goods they purchase.

Implied Warranties -- Legally imposed on the

seller, who implies that a product will conform to the standards of trade.
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NEGOTIABLE INSTRUMENTS
Negotiable Instruments

LG4

Negotiable Instruments -- Forms of commercial

paper that are transferable among businesses and individuals.

Four conditions for using negotiable instruments:

1. They must be written and signed by the maker or drawer.
2. Be made payable on demand or at a certain time.

3. Be made payable to the bearer.

4. Contain an unconditional promise to pay a specified amount.
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Contract Law

CONTRACT LAW
LG5

Contract -- A legally
enforceable agreement between two or more parties.

Contract Law -- Specifies

what constitutes a legally enforceable agreement.

Breach of Contract -When one party fails to follow the terms of a contract.
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Contract Law

CONTRACT REQUIREMENTS
LG5

A contract is legal and binding when:

1. 2. An offer is made Theres a voluntary acceptance of the offer

3.
4.

Both parties give consideration

Both parties are competent

5.
6.

The contract covers a legal act

The contract is in the proper form
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Contract Law

BREACHED CONTRACTS
LG5

If a contract is breached the following may be ordered:

- Specific performance

- Payment of damages
- Discharge of obligation

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PROGRESS ASSESSMENT

Progress Assessment

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Whats the purpose of the Uniform Commercial Code (UCC)? Compare express and implied warranties. What are the four elements of a negotiable instrument specified in the UCC? What are the six conditions for a legally binding contract? What could happen if its breached?

APPA-21

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The CLAYTON ACT of 1914

The History of Antitrust Legislation

LG6

The Clayton Act prohibits:

- Exclusive dealing
- Tying contracts - Interlocking directorates

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ANTITRUST LEGISLATION

The History of Antitrust Legislation

LG6

The Federal Trade Commission Act of 1914

created the FTC and prohibits unfair methods of competition in commerce.

The Wheeler Lea Amendment gave the FTC

additional control over false and misleading ads.

The Robinson-Patman Act of 1936 prohibits price

discrimination and applies to buyers and sellers.

APPA-23

HISTORY of HIGH PROFILE ANTITRUST CASES

Case U.S. v. Standard Oil U.S. v. American Tobacco U.S. v. E. I. du Pont de Nemours U.S. v. AT&T U.S. v. Microsoft Year 1911 1911 1961 1982 2000 Outcome

The History of Antitrust Legislation

LG6

Standard Oil broken into 34 companies American Tobacco split into 16 companies DuPont ordered to divest its 23% ownership in General Motors Settled after Ma Bell spun off into regional companies Microsoft ordered to halt prior anticompetitive practices

APPA-24

*Laws to
CONSUMER PROTECTIONS
Protect Consumers LG6

Consumerism -- A social movement that seeks to

increase and strengthen the rights and powers of buyers in relationship to sellers.

The Consumer Product Safety Commission provides information concerning consumerism and consumer protection.

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NUMBER of IDENTITY THEFT COMPLAINTS

*Laws to
Protect Consumers LG6

Source: Federal Trade Commission, www.ftc.gov.

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TAXES
Taxes -- The way federal, state, and local
governments raise money.
Tax Laws
LG7

Some forms of taxes:

- Income taxes - Property taxes

- Sales taxes
- Excise taxes

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SIN TAXES
State Tax Rates per Pack of Cigarettes
Tax Laws
LG7

State New York New Jersey Massachusetts Rhode Island Washington

Rate per Pack $2.75 $2.58 $2.51 $2.46 $2.03

Source: National Conference of State Legislators.

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DO the RICH PAY TAXES?
Tax Laws
LG7

Taxpayers Top 1% Top 5% Top 25% Top 50% Bottom 50%

% of Total Taxes 40% of total taxes 60% of total taxes 86% of total taxes 97% of total taxes 3% of total taxes

Source: IRS, Statistics of Income 2008, www.irs.gov.

APPA-29

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BANKRUPTCY LAWS

Bankruptcy Laws
LG8

Bankruptcy -- The legal process by which a person,

business, or government entity, unable to meet financial obligations, is relieved of those debts by a court.

Options of declaring bankruptcy:

- Chapter 7: Straight bankruptcy - Chapter 11: Reorganization - Chapter 13: Repayment plan
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GOING, GOING, GONE
Bankruptcies of 2008-2009
Tax Laws
LG8

Circuit City KB Toys Linens n Things Steve & Barrys Mrs. Fields Cookies
APPA-31

How ASSETS are DIVIDED in BANKRUPTCY

Bankruptcy Laws
LG8

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DEREGULATING COMMERCE

Deregulation vs. Regulation

LG9

Deregulation -- The government withdraws certain

laws and regulations that seem to hinder competition.

Deregulation efforts were active in:

- The airline industry - Telecommunication - Some public utilities

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HAMBURGER REGULATIONS

Deregulation vs. Regulation

LG9

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PROGRESS ASSESSMENT

Progress Assessment

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Whats the purpose of antitrust law?

Describe bankruptcy provisions under Chapters 7, 11, and 13.

Whats deregulation? Give examples of successful and unsuccessful deregulation.

APPA-35